Gov. Gray Davis will release a state budget revision today that would push more than $10 billion of the deficit into the future, raise taxes for smokers, shoppers and high earners, and all but guarantee a tripling of the vehicle license fee, sources said Tuesday.
The carefully reshaped spending plan attempts to placate various political interests by providing some relief to schools and scrapping most of an unpopular plan to ship state services to cities and counties.

The revision, designed to close a budget gap once estimated at nearly $35 billion, still relies on similar principles to those set forth in January: deep spending cuts, tax increases and borrowing.

Davis' new plan, to be submitted to legislators today for consideration, differs mainly because it heeds Republican lawmakers' calls to engage in long-term borrowing to whittle the deficit, and it assumes that an increase in the yearly car tax will be triggered before or during the fiscal year that begins July 1.

But Republicans, who must provide some votes for the plan to receive the two-thirds majority required for passage, were not impressed.

"The governor doesn't appear to be prepared to balance this budget without raising taxes, but I guarantee you there's no one in our caucus who will move in the direction of adding a half-cent sales tax," Assembly Republican leader Dave Cox of Fair Oaks said.

Sources close to the budget said:

* The cornerstone of the new plan calls for selling $10.7 billion in deficit bonds to spread the pain over five years and spare schools and colleges from some cuts.

* Davis is proposing a half-penny per dollar sales tax increase -- expected to pump $2.3 billion a year into the state treasury -- to repay the bonds.

* The new proposal also shrinks a major piece of Davis' "realignment" plan to raise taxes and shift responsibility for some state services to cities and counties. It will call for an increase in the state's cigarette tax and for the creation of two new upper-income tax brackets to collect more from the state's top earners. Local governments would get $1.8 billion from the tax increases to pay for the shifted programs.

* The plan assumes that the vehicle license fee will be raised administratively under a 1998 law allowing an increase if the state has budget problems. The increase would mean a $124 increase for the average car.

Although the Davis plan still contains severe cuts for health and welfare programs, it eases some of the sting for education.

Community colleges would take less of a hit than expected because Davis is calling to increase student fees from $11 to $18 a unit -- instead of the $24 he proposed in January. And K-12 schools would receive about $700 million more than earlier slated, sources said.

Davis also is protecting some of his pet programs, including one to reduce class sizes.

Analysts said Davis had little choice but to remold his budget plan.

"He had two choices: One, to stay exactly where he was even though he clearly knew there was resistance in the Legislature or to try to tailor a document to lead us closer to compromise," Democratic political consultant Gale Kaufman said.

Davis spokesman Steve Maviglio said Tuesday that the Democratic governor's revised plan "reflects largely what the Legislature has asked him to do."

Democratic lawmakers had balked at the governor's call to shave long-term costs by shifting responsibilities to local governments without the money to pay for them. Meanwhile, Republicans urged borrowing money to pay off the deficit over two or more years, rather than raise taxes to close the gap in one year.

"He's made an honest effort to take the lead this year in proposing something that could win bipartisan support," Maviglio said.

The governor "has said repeatedly that he wants the Legislature to take the bitter medicine this year and get the job done. There doesn't seem to be an appetite for that from either party."

But GOP leaders have said that the Davis concession still might not be enough to sway them from their stance against a tax increase.

"Senate Republicans have said that we are willing to negotiate on any and every issue except tax increases," Senate Republican leader Jim Brulte of Rancho Cucamonga said.

Davis in January released a $96 billion state budget for the 2003-04 fiscal year that included tax increases, borrowing and other measures -- including the realignment -- to fill a gap he estimated would grow to $34.6 billion.

The Legislature approved spending cuts and other savings that have shaved $12 billion from the shortfall, but finance officials have said the deficit could widen because of higher-than-expected costs and sagging revenues.

Several Republican lawmakers have accused the governor of overestimating the size of the deficit to push a tax increase, and to make himself seem a more accomplished leader when the gap was eventually closed.

Although Maviglio wouldn't pinpoint the size of the revised deficit, he said Tuesday that it is as bad as if not worse than Davis' prediction: "I think you will hear, if not these words, a message of 'I told you so.' "

Budget highlights
Gov. Gray Davis' revised plan for 2003-04 reportedly seeks to:
* Raise the state sales tax by half a percent to repay more than $10 billion in deficit bonds.

* Increase the cigarette tax and the tax on top income earners.

* Lower some proposed cuts to K-12 schools and community colleges.

* It also assumes the vehicle license fee would be raised, costing the average driver about $124 more annually.